Liberal Scholars Hail Conservatives' ‘Abandonment’ of Free Market

By Josiah Ryan | October 7, 2008 | 5:59 AM EDT

"Essentially nothing remains" of the free market today, says economist and author James K. Galbraith.

( – Congressional passage of a $700 billion Wall Street bailout – legislation that was supported by many Republicans and signed into law by President Bush last week – is an indicator that conservatives have abandoned free-market economics, said a group of scholars at the liberal New America Foundation on Monday.
A spokesman for the conservative Heritage Foundation, however, told that while many conservatives supported the bailout, they did so because steps were needed to protect the country from the financial crisis that was caused by a violation of free market principles.   
“What remains of the free market today?” asked James Galbraith, author of “The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too,” at the New America Foundation discussion.
“My answer is that, apart from slogans, essentially nothing remains. The substantial content [of free market economics] has, in practice, though not necessarily in idea, disappeared from the conservative tendency in modern government,” Galbraith said.
“Balanced budgets disappeared early, and except for their return as an artifact of the information technology boom and bubble, they were never heard from again,” he said.
“They surely will not be heard from in any serious form for years to come. What we call conservatism in power today is a form of big government cronyism that I call the predator state,” Galbraith added.
Audrey Jones at the Heritage Foundation, however, told that the free market is alive and well and that many conservatives think the mortgage and credit crisis that led to the bailout were caused by government interference in the free market.
“The idea that the free market has died is a myth that’s out there,” Jones told “Though many conservatives believed the economic bailout was necessary, it was needed as a way of repairing damage done by violation of free market policies.”
Conn Carroll, assistant director of Heritage’s Center for Media and Public Policy, wrote on the organization’s blog Monday that it was “heavy government regulation” that caused the economic crisis.
“Freddie Mac and Fannie Mae purchased more than a third of the $3 trillion in junk mortgages created during the housing bubble,” wrote Carroll. “They did so because heavy government regulation required them to push as much money into questionable mortgage buyers as possible.”
But Barry Lynn, a NAF senior fellow, said the ideas of free market economics have never been viable and that the financial crisis was simply the clash of free market mythology with reality.
“The free market has only existed in myth structured through political acts,” said Lynn. “It is a myth, and it’s a myth that is designed precisely to hide the exercise of power.”
When asked Galbraith if he thought conservatives in Congress would agree with his suggestion that they had “abandoned” the free market, he said that they may never probably abandon it in principle but will be forced to abandon it in practice.
“I think elements of belief in a free market will never disappear, but there is a conflict between that body of ideas and the reality of a complex state and society in which we live,” Galbraith said. “Someone in the legislative branch who doesn’t have operational responsibility has a lot of room for philosophy.”